Vallourec S.A.

Good morning and welcome to Valorex Q3 2025 Result Presentation hosted by Philippe Guillemot, Chairman of the Board and Chief Executive Officer, and Sacha Diber, Chief Financial Officer. For the first part of the conference call, all participants will be in listen-only mode. During the question and answer session, you may ask questions by joining the conference call and dial Q5 on your telephone keypad to enter the queue. And now I would like to hand the call over to Conor Lina, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining us for ValorX Third Quarter 2025 results presentation. I'm Conor Lina, Vice President of Investor Relations at ValorX. I'm joined today by ValorX Chairman and Chief Executive Officer, Philip Guillemot, and ValorX Chief Financial Officer, Sasha Bieber. Before we begin our presentation, I would like to note that this conference call will be recorded. A replay will be available following the call. You can find the audio webcast on our investor relations website. The presentation slides referred to during this call are also available for download here. Today's call will contain forward-looking statements. Future results may differ materially from statements or projections made on today's call. The forward-looking statements and risk factors that could affect those statements are referenced on slide two of today's presentation. These are also included in our universal registration document filed with the French Financial Market Regulator, the AMF. This presentation will be followed by a Q&A session. I will now turn the call over to Philippe Guillemot.

Thank you, Conor. Welcome, ladies and gentlemen, and thank you for joining us to discuss BALUEC Southwater 2025 results. In the third quarter, we delivered solid results once again, with group EBITDA margin rising to 23%, the highest level since the first quarter of 2024. With this, we have now maintained our EBITDA margin around the 20% level and generated positive cash flow every quarter for the last three years. Our strategic initiatives are paying off, demonstrated this quarter by the closing of the tubes profitability gap versus our primary peers. You can see today's agenda on slide 3. I will move to slide 5 to discuss the highlights of the third quarter. Our third quarter results were in line with our expectations. EBITDA of 210 million euros was at the midpoint of our guidance range. We recorded a very strong net income of 134 million euros. Our net income has recently been aided by the execution of strategic projects, in this case, the sale of Serimax. Group EBITDA margin was 23%, driven by the robust performance in tubes. Tube's EBITDA pattern improved by more than 25% sequentially to 621 euros. Total cash generation was positive for the 12th straight quarter. We reduced net debt to 140 million euros. Looking ahead, we expect fourth quarter EBITDA to range between 195 and 225 million euros. Our full year outlook confirms the expected second half versus first half EBITDA improvement. We have seen some positive trends in the business despite a volatile background environment. In the US, our fully integrated domestic operation is benefiting from high levels of customer demand. Recent bookings have been strong. In Brazil, we secured a major contract with Petrobras, which will expand our OCTG market share. This contract further demonstrates Valuate's ability to deliver high-value solutions from our domestic manufacturing base. Meanwhile, in select markets in the Eastern Hemisphere, we have seen delays in some customers' activity. These delays will result in some orders being invoiced in 2026, later than initially planned. This delay is embedded in our fourth quarter outlook. Turning to capital allocation, we further optimized our capital structure in the quarter, redeeming 10% of our 2032 senior notes. In addition, today we announce a special meeting for holders of Valourec warrants. The key proposal will be to allow Valourec to satisfy its warrants obligations with existing or new shares. The current terms of our agreement only allow the delivery of new shares. This will enable maximum flexibility in our capital return options over the next year. Let's move to slide 6. The two goals of the new Valorec plan were to crisis-proof our business and deliver best-in-class profitability. Today, I am pleased to announce that Valorec has achieved another major milestone. In the third quarter, we fully closed the margin gap versus our primary fear. This is thanks to our core principle of value over volume and our relentless focus on operational excellence. We also continued our strong trend in return on invested capital in Q3. I assure that our journey will not stop here. We have many initiatives underway to further improve our return on invested capital. Let's turn to the current market environment on slide 8. We start here with the US OCTG market. While crude prices remain volatile, oil draining activity bottomed in August. The oil recount increased modestly through the third quarter. Gas-directed draining has stabilized at the healthier level after rebounding in H1. Recent strength in U.S. gas pricing could drive higher activity. OCTG consumption per rig is also a tailwind. Since 2015, OCTG intensity per rig has increased nearly 5% per year, as shown on the right-hand chart. The drivers are clear, our customers are drilling longer laterals and the rings are drilling at faster rates. The push towards longer laterals has driven strong demand for our high torque connections. Because of this, one of our return enhancing initiatives is the construction of our new threading line in Ohio, which we announced earlier this week. This line will serve a strong and increasing market demand for high-torque connections with a high return on capital. Let's move to slide 9. On the left side, you can see the import trend. While recent data is unavailable due to the US government shutdown, we believe imports have started to decrease. This is particularly true for seamless products. Our order intake has been robust in recent months, reflecting healthy demand level and an improvement in our market share. This is likely at the expense of some of these imports. Seamless post pricing was stable in Q3, with the latest survey showing a slight increase. We have seen divergence in welded versus seamless pricing in some recent industry surveys. This validates the differences in import economics we highlighted last quarter. Let's move to the international OCTG market on slide 10. Demand, as measured by the rig count, remains at the LC level in most regions. On the left, we highlight that activity trends have not been uniform across key geographies. Middle East activity, particularly offshore, has shown a downward trend over the past several months. This was particularly driven by activity reductions in Saudi Arabia. Our premium portfolio is outperforming the overall market. Still, we have seen some delays in customer activity in select countries, especially in the Middle East and North America region. Meanwhile, activity in other international markets has moderated very slightly. Many of our core markets, such as Brazil, have been stable and look set for further growth. Market prices, according to Reichstag Energy, are consistent with a change in activity. There has been softening in the Middle East relative to offshore markets like North Sea. Our product mix is skewed toward more premium grades and connections at this index. Our pricing has remained more stable, including in the Middle East. Looking at the long term, our key international customers continue to advance ambitious capacity growth plans. This will inevitably lead to higher draining activity and higher OCTG demand well into the future. The structural shift towards increased gas and unconventional fields and the resilient development of deep water basins is a challenge. These resources require high-tech solutions, including new fit-for-purpose solutions that we are developing today. Before I hand over to Sacha for his last participation to Valourec's analyst call, I would like to warmly thank him for his contribution next to me to the successful execution of the new Valourec plan, which I announced in May 2022, and that Sacha will recap in his presentation. We all wish him the best for his future challenge in Germany.

Good morning, everyone. Thank you, Philip. Yes, I'm leaving with a lot of gratitude and also some pride. We're looking back on what we have achieved as a team. Under your leadership, Philip, we have executed the new Volowek plan, including the closure of plants and implemented a change in the business mix towards high-value-add products, which allowed us to generate cash consistently. This opened the door for the refinancing and the initiation of shareholder returns. Meanwhile, our shareholder base has transitioned from Apollo and SVP Global towards Basler Metall and many global investment funds. Similarly, we have established a new banking group and are now fully transitioning towards an investment-grade balance sheet. In short, the chapter has closed and a new one is opening. The Valorec team will go towards the next level of efficiency, continuing to further optimize our return on capital. This will offer new opportunities, but will also benefit from new skills and fresh energy. I will join the BASF group to support them with the carve-out and IPO readiness of the agricultural solutions business. It was a fantastic journey with Valorec, and I thank you all for your support during those years. Let me also highlight important changes in our investor relations team. Conor will continue to lead the team until early 26. However, then transition the IR leadership to Daniel Thompson, who recently joined us from Exxon BNP Paribas. I think many of you know Dan. Sometime in H1 2026, Conor will then fully concentrate on his new responsibility as finance head for North American operations. Furthermore, we have another addition to the IR team, Igor Leblanc, who brings with him lots of valuable experience from his former Valorec roles, including for sales in Northern Africa. Let's start with page 12. This slide shows the impact of the new Valorec plan. As part of our premiumization strategy, we have changed the business mix and increased prices. We also worked hard on our costs, reducing fixed costs, and thereby increasing our resilience to market cycles. The combination of higher prices and higher efficiencies have contributed to an EBITDA margin that is now consistently around 20% for the last three years. We additionally focused on the bottom line, both in the P&L and managed for cash. With diligent working capital management, we have improved contractual payment terms with our suppliers, focused on the cash profile of our customer contracts and are continuously optimizing our inventory levels. This has led to a balance sheet with basically zero net debt and ample liquidity, giving us the flexibility to operate successfully in any market environment and allowing for attractive shareholder returns. On page 13, you have the group KPIs. Q3 was another quarter that added to the execution track I just referred to. Our APTA came in right at the midpoint of our guidance, though again we had some foreign exchange headwinds. Let's look at our tube segment on page 14. Tube's volumes increased sequentially, and so did the average selling price. We have recently recorded some important customer wins, for example in Brazil. The new LTA with Petrobras will lead to revenues starting in H226 and then fully from 27 onwards. Tube's profitability is shown on page 15. In line with our value over volume strategy, based upon a clear selection of where to play or making use of our premium capacity, we also increased profitability in the tube segment to one of the highest levels in recent quarters. As Philip outlined, we are now also closing the margin gap with best-in-class peers, though there are many more performance initiatives to come. Over to page 16. Mine and forest earnings reduced sequentially, but are still higher than the normal run rate we have guided in our capital market day. Votums were slightly down sequentially, while the quality of the ore sold remained high. As expected, cost went up slightly, though still leading to an attractive EBITDA margin for the segment of more than 40%. Moving to net income on page 17. Net income was strong, additionally supported by a capital gain recorded as part of the SEBI max disposal and a favorable tax rate. Looking at the right side of the chart, Valorek has clearly moved away from being a company with a predominant capacity and top line focus towards managing for the bottom line, both in the P&L and in cash. Page 18 shows our cash flow. Total cash generation came in at 67 million, despite of a 43 million increase in working capital. Restructuring charges and asset disposals upset each other in the quarter following the disposal of Cerimax. Cash conversion was once again high. Page 19. In line with positive cash generation, net debt improved and also gross debt came down following the repurchase of 10% of our outstanding bonds. The reduction in gross debt will continue in the next quarter as accrued interest will then reduce subsequent to the payment of the coupon.

Philip, back to you. Thank you, Sachar. Let's turn to slide 21 to discuss our outlook. Starting with our tubes business. In the fourth quarter, we expect volumes to increase slightly sequentially. EBITDA patterns should remain similar to Q3. For mine and forest, we expect production soil to be around 1.4 million tonnes in the fourth quarter. The sequential decline is in line with typical seasonal patterns. We expect full year production of around 6.2 million tonnes. Every day in the mine and forest segment will be contingent on market prices for iron ore. That said, we have aged a portion of our production so our results will not be fully exposed to further price developments from here. At the group level, we expect our fourth quarter EBITDA to range between 195 and 225 million euros. Looking at the full year, we confirm our prior year guidance for EBITDA improvements in the second half. Based on our Q4 outlook, full year EBITDA is expected to range between 799 and 899. 29 million euros. Let's conclude on slide 22. We remain focused on improving our profitability and return on invested capital as we drive Valorec towards operational excellence. We are very pleased to close the profitability gap versus our primarities in the short quarter, but we will not stop there. Our vertically integrated US good swing is paying dividends, with customer demand remaining strong. Finally, we strive to be one of the most shareholder-friendly companies within our peer group. Today, we announced a key step to improve flexibility in our shareholder returns. By allowing our warrants to be satisfied with existing shares, including treasury shares, we can approach our shareholder return in 2026 in a more holistic way. Thank you again for your attention. Sacha and I are now ready to take your questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Now we have a question from Matt Smith from Bank of America. Please go ahead.

Hi there. Good morning, guys. Thanks for taking my questions. I had a couple, please, both reflecting on some of the prepared remarks. So, I mean, the first one would be around the international business. You commented on some delays to customer activity, so orders from 4Q into 26. I guess I just wondered if... Your confidence level, this is simply order deferrals. I guess you already have visibility on that, but perhaps that leads into some wider comments on the international business for 26. It might be useful if you could and you could talk to the visibility that you already have there from the order book. I think that would be useful. Thanks. And then secondly, coming back to the warrants proposed in those modifications to the terms today, I just wondered if you could talk to sort of the intention and what you would see as the sort of ideal outcome and resolution from all of this, please.

Okay. Thank you for the question. Well, first, as you know, our long-term agreement with CO7 do not have quarterly volumes commitment. So we must make an estimate of our activity levels. In certain countries, activities have been slower than forecast. In addition, customers have some control over when we deliver and invoice orders. So we have some highly contributed orders that push out of the year. So it's just a question of time. We have these orders. It's just a question of when customers will need the pipe so we can invoice them. And that's why what we don't invoice as expected in 2004 will be invoiced somewhere in 2026. Overall, about the market we are in, I think we are confident. I think our customers have capacity increase plan they are executing. And so far, we have no reason to think they won't do so, especially as we have seen that OPEC Plus is ramping up production. So that's for your first question. As far as the second one is concerned, as we indicated, we want maximum flexibility in our return to shareholders. And with the change of terms of the agreement with the warrants orders, I think we will open the door, obviously, to potentially buy shares in order to have treasury shares that could be used at the time warrants will be exercised, and not only to use new shares.

Now we have a question from Guilherme Levi from Morgan Stanley. Please go ahead.

Hi, good morning, everyone. Sasha, wish you, of course, all the best in your next steps. I have two questions, please. The first one If I may, you commented on your perception of lower imports into the US recently. So I was just curious to see how quickly you think that inventory levels can fall in order for you to see a more significant increase in terms of prices and margins on the back of the recent import tariffs in the country. And then the second one, thinking about this new investment in the threading line in Ohio, could you perhaps share with us more examples of small scale investments that you have in mind that you could make over the coming quarters and how should we see your maintenance topics and also your total topics including these small initiatives over the coming years? Thank you.

So, yeah, what we start to see is the impact of the tariff on the US imports. Even though there is no statistic available, it looks like imports are decreasing. By the way, One of the European players who used to sell to the U.S. has announced yesterday that they will go from three shifts to two shifts, so lower volume, which is the first clear indication that importing pipes in the U.S., given the tariff, may not be as viable as in the past or as profitable as in the past. So this, as a consequence, favors domestic players. And I remind you that 100% of what we sell on the onshore market in the U.S., we make it in the U.S. from seed making to finishing. And that we are the second player on the seamless by OCGD business in the U.S. So as far as inventory is concerned, yes, they were up because of the imports in anticipation of the tariff. But now they are obviously slowly but surely depleted. And we think that we will see even more of this happening in 2026. That's the reason why, as I said, we see strong demand for our product and premium products, as I mentioned earlier. Trading line. So the trading line investment in the US, 48 million US dollars, we announced on Monday, and we had, by the way, a groundbreaking ceremony in Ohio to do so, is a clear illustration of what we are doing. First, value over volume. Here we are talking about increasing capacity to deliver high torque connection to help our customers to generate productivity gains. So we are really at the heart of their success. Second, we invest with obviously a state of the art line. But I can guarantee you that this is a good example of an investment that will further improve our return on invested capital. As far as CapEx is concerned, we stay very disciplined. And what we have in mind doesn't mean that we are going to increase CapEx envelope in the next few years. I think we are in the 200 million euro range, and we have no intent to exceed this amount. By the way, talking about return on invested capital, which is a key matrix we are focused on, and we will be even more focused in the next few years. Another example is our investment in Thermotider Brazil, the thermal insulation business in Brazil. We more than doubled the value we can sell to customers. And I can already tell you that this acquisition, this new plant, is already fully loaded for next year to thermoinitiation, to thermoinsulate value rate pipes. So another good example of an investment we are making to further improve our return on invested capital.

Just adding one addition to what Philip said on CapEx. For the current financial year, looking at what we have spent at the nine-month stage, acknowledging there's only the fourth quarter left, I think we will come out quite a bit below the 200 million. In the capital market day, we have mentioned maybe a long-term average of 175. I think we'll be closer to that in this fiscal year. And thanks for your wishes, Pileme.

Now we have a question from Kevin Rotter from . Please go ahead.

Yes, good morning. Thanks for taking the question. And first of all, Sacha, well done for everything that has been done in terms of financial, but also in terms of communication. Frankly, it has been very appreciated by anyone. So good luck also for the next journey. Wishing the best. The first question, if I may, just going back on the shifting of the volumes from Q4 to 2026, I was wondering if you can provide a bit of magnitude, the impact on Q4 in terms of volumes, making some maths and finding that maybe we are thinking about 30,000 tons of tubes that we will be missed in Q4 compared to the previous expectations. So maybe some words around that, please. And the second one, sorry for this stupid accounting tax question, but implicitly with the new mechanism, the variants, you are telling us that potentially you would buy back some shares. In the current French tax environment that is evolving every day, Can you just try to summarize and, of course, understand that it would be subject to what we have in terms of budget in the coming weeks, but what it would imply for the tax payment on any buyback for you, not to be related to the difference between the cash payment and the book value, et cetera, please.

So going back to Q4 volume 10, First, I remind you that we will invoice more in Q4 than Q3. And I won't give you any indication of how much we could have invoiced at customers asked to be delivered as we forecast it. And again, it's only a forecast. And every quarter, we have to forecast what customers will ask for. But again, I'm talking about orders we have. As far as the warrants are concerned and the tax treatment, I remind you that the tax in France is such, on share buyback, is such that if we don't cancel the shares, so we use them, and as an example, we can use them for management incentive plan, they are not taxed. So we are immune to this. And as far as the amendments that have been voted at the Parliament, what I understand is that it's not likely to be in the final budget as it is totally incompatible with European laws and all the other regulations. Okay, thanks.

Now we have a question from Guillaume Dunabai from Burstyn. Please go ahead.

Yes, good morning. Thank you, Sasha, for all your help over the past few years, especially if I remember between Christmas and New Year's Eve a few years ago. Three questions, if I may. First, the first one is the two first ones, in fact, are for Philippe. So I've been impressed by your average selling price, which is up 8% sequentially, while globally OCCG prices have still remained flattish. We didn't have yet an increase in OCTG prices, so what has been your secret sauce during Q3? Is it a question of mix, more connection? If you can elaborate a little bit, that's my first question. My second question is on your 2026 outlook. Many services companies have provided a much more constructive 2026 outlook. Is that what could have been expected? So just curious to see whether or not your view on 2026 has evolved. You mentioned probably more drilling at some stage. And the third question is about the warrants, sorry to be long, just to fully understand. So, basically, what is going to happen? So, the warrants are going to be exercised. So, you are going to get some cash with additional shares. Am I understanding correctly? Or if not, please correct me.

Thank you. Okay. So, our secret sauce, but now I think it's You start to see it in the numbers. Value over volume. We are very serious about it. What we sell is high-value-added products, which obviously give us some pricing power. And again, we don't only sell tubes. We sell solutions. We sell tubes and service-associated. So this is a combination of all this. And as I've said since I joined, Our focus is to develop the right portfolio of customers and markets that are in need of this high-value-added product. So yes, definitely, what we sell, and that's what I mentioned when we compare our average selling price to the high-stat index, nothing to compare. We are much more stable than what you see on that chart. So it's just an evidence that the strategy and the change of strategy I made when I joined is working. 26, I won't guide for 26, but as I said, U.S. market is good. We see demand, very strong demand, months after months. And so far, no reason to think it won't continue that way. And as far as drilling activity is concerned with some international customers, you see that Petrobras is obviously very active, even talking about exploration of the Amazonian area. And in the Middle East, I think Aramco has seen some decrease in their lead count, but may increase next year again. So again, so far, I think demand is still there for our high premium solutions. As far as the warrants, the question was?

Your principle understanding is correct. Provided that the conditions are satisfied in the summer of 26, the warrants will convert and this will lead to a capital inflow to the tune of 300 million and a bit to Vanovic. There is no change to that. The change, if any, that we have announced today is that we want to create flexibility in how we serve the warrant holders with shares. The existing documentation allows us to create new shares and new shares only, while after the approval from the warrant holders, we would then also have the opportunity to deliver existing shares.

So, again, we stick to our return policies. We said we would return to shareholders between 80% and 100% of the total cash relation of the year before. So as you have noticed, we have year-to-date generated cash and obviously even more at the end of the year. So all this cash is available and obviously is supposed to be returned to shareholders within our policy. So with the warrant agreement terms changed, we have the flexibility to use existing shares once warrants will be exercised at the latest end of june next year and obviously we may we may decide to buy back shares in order to have them available in due time when it comes to the secret sauce maybe you also want to just remind people about the current stage of our north american onshore business which i think is also doing quite well and added

to the ASP development that we have seen?

Yeah, on the US market, as you see, and when we announced investments on the ITO condition, it means that, yeah, the mix we are seeing in North America is more high value added than it used to be. And as a consequence, lead to higher average selling price too. So what we see What you see on the overall group average selling price is true in all regions. And the same thing for Petrobras. The long-term agreement we have signed with Petrobras that will start to fall in our numbers in the second half of 26 is obviously with a mix of products of high value added, including larger diameter, 18 inch and above, that we, in the past, were not able to produce in Brazil, but now we are able to produce in Brazil, thanks to the investments which were part of the new Alexa.

Maybe just a follow-up on the warrant. It means that practically you are likely, or you have the option or the flexibility to buy back and to reduce some of the dilution which will be caused by warrants. Am I correct?

You are correct. If all warrants are emphasized and we deliver only new shares, it's roughly 15% dilution. So if we buy back shares and we use existing shares, obviously we will reduce the dilution. And that obviously is the option we want to have.

Now we have a question from Paul Redman from BNP Paribas. Please go ahead.

Yeah, thank you very much for your time guys. I just want to delve a little bit down into the shareholder distributions for next year. So you've been paying out dividends for the past couple of years as part of the 80% to 100% of total cash generation paid out to shareholders. Is this new buyback possibility part of that 80% to 100% or does it go beyond it? And if it's part of the 80% to 100%, do you have a minimum level of dividend you would like to guide us towards and the rest possibly coming through buybacks? And then, Sacha, I just wanted to ask you, you've been at the company and the company has changed a lot over the past few years. I wanted to ask, have you got any key highlights that you can say have been your biggest successes over the past few years?

So before I hand over to Sacha, yeah, again, we will stick to our return policy. So we are very disciplined, as you know, in everything we do. So we will stick within the 80 to 100. So we'll see how much total cash will be generated in 2025. And we will use this to potentially execute any share buyback to, as I said earlier, reduce the illusion at the time of warrant execution. But as you rightly said, we will cash in more than 300 million euros end of June, and this cash, obviously, will have to be returned to shareholders within the same return policy we, I stated earlier, 80 to 100% of the social generation.

Sacha, and then on to you. Yeah, well, thanks for the question, but to be honest, I'm not sure whether I had too many successes, but as a team, we had a lot, and that's what we are proud of. I think ultimately leading to the establishment of a track record and therefore the recreation of trust, I'd say, with many stakeholders, equity and credit alike. So I think it's the sum of many of the operational initiatives from the team, the refinancing, some work on the financial infrastructure that we have been doing that ultimately led us to the stage where we are. But again, we don't get tired of hammering the point home that we have done a lot of good, but there's more to come. Valorek will go into the next phase of optimization. And this is why, for me, the story is ending, but for Valorek, it's just the beginning.

Maybe Sacha is too modest, but remember, we have refinanced our balance sheet in 2024. uh and it was uh obviously a good to see that we managed to refinance it the way we we did on top you remember that fitch has awarded an investment growth rating and i hope more to come so again uh for a company that was almost bankrupt in 2021 being where we are today with all the obviously the opportunity you have to further create values through much higher return invested capital than our weighted average cost of capital is very, very rewarding. And again, I thank Sacha for having been next to me to deliver this super performance so far.

Now we have a question from Baptiste Lebac from OdoBHF. Please go ahead, sir.

Yes, good morning everybody. First, Sacha, congrats for the very impressive job you have done, even if it's a team job, but very impressed by the way you did it and good luck for the future. One question regarding, let's say, working cap in Q4. You mentioned some delays in terms of deliveries. We have seen some tension in working cap already in Q3. How should we think about, let's say, working cap at the end of the year? And second question regarding your, let's say, optimization of Brazilian assets. Is it now fully on stream? And if I'm not wrong, you could sell some, let's say, lands in this country. How is it evolving? Thank you.

Well, as far as Q4 working jobs, we expect a modest increase. So no big negation versus where we are. As you know, since the beginning of the new valoric plan, I think we have been very focused on working cap. And as shown by Sacha in one of his slides, you can see that the working cap expressed in days has steadily decreased over time. And we continue, and we see room for further improvements in the future. So you refer to maybe, yeah, so first, As we are very focused on this, this is what's going to drive the next five years, in 2030. Retail investment capital, we challenge every asset in Balouac. And so that's part of the challenge. So the forest, obviously, is an asset, as you know, that doesn't generate EBITDA, but is used to produce vegetable charcoal. Again, as any asset in Valorite. And you remember when I said, when I joined, there is no room for asset which is not generating cash. So each asset in Valorite is challenged. And that's what just we do again and again. Okay.

Thank you very much.

Now we have a question from Jean-Luc Romain from CIC Market Solutions. Please go ahead.

Good morning. Thank you for taking my question. Congratulations to Sacha and to Conor for his promotion. My question relates to the second phase of investment in the mine in Brazil. Could you update us on why you are there when it should start and what are the benefits you are expecting from this second phase of extension?

Yeah, on the mind, thank you for the question. You remember at the capital market day in September 23, we gave you some numbers on what we were doing and what we were expecting. And I'm going to tell you that we delivered exactly what we said even better, especially in H1 where we had opportunity to extract high quality iron ore from our mine so the expansion is well on track phase one phase two and we expect to deliver the abd we mentioned at that time uh so up to 125 million euros between 100 and 125 as we go so very pleased with the progress of the of the mine and on the mine i insist that we are applying the same secret tools that we do on the tube business, value over volume. And that's the reason why tonnage may be less, but quality is higher. And the way we operate the mine enables us to extract more iron ore from existing ground. So, again, another good example of a value over volume strategy impact.

As a follow-up, Do you have in your mind kind of what do you say better, so enough resources of better quality ore which can help you continue increasing the value? That's what we should understand.

Yeah, obviously iron ore is what it is in the mine and it may change from where we have program over time, but the way we, We process the IONR, the ROM, mainly to higher IONR content, so saleable values at the end of the day. So that's exactly what we are doing. I won't go into the details, but, you know, okay.

Just to remind you that we are externally selling the vast majority of our production.

Yes, yes.

Thank you very much. But again, applying the secret sauce, value over volume, so less tonics, but same editing.

Okay? Now we have a question from Jamie Franklin from Jefferies. Please go ahead.

Hi there. Thank you for taking my questions. So two from me. So firstly, you mentioned the divergence between seamless and welded. And looking at the historical data, it actually appears to be the highest point on record, the gap between the two. Can you maybe talk about whether you see any risk here in terms of substitution of welded for seamless, given that the differential is so high? um and secondly if i can just push one more time on the middle eastern volumes so i think previous expectation was that 4q volumes would be substantially up in the third quarter in order to reach around 1.3 million ton in 2025 now if we assume assume that 4q is only slightly better than 3q we're going to get closer to 1.2 for the full year so can we assume that the entire Delta there shifts into 2026. Thank you. And finally, Sascha, congrats on the great job you've done at Valeric. Wishing you all the very best in your new role. Thank you.

Yeah, I assume when you talk about divergence between seamless versus welded, you talk about the U.S. market. So, yeah, dynamic is, again, we illustrate it in our last quarterly communication, how these two markets diverge. Seamless imports are in proportion less than they are in wedges. But at some point, it becomes non-economical. With the tariff, it becomes faster, non-economical to import seamless than wedges. That's why we see in our business, which is only seamless, faster the impact of the tariff on our business. Substitution, we don't think so, because as we said, the market is more and more premium, and these high torque connections are seamless pipes, and they will continue to be seamless pipes. As far as volume is concerned, yes, again, we have a slight increase in volume, maybe not as much as we could have expected, thanks to our forecast. So they are delayed because customers asked us to deliver pipes later in 26. This will happen in 26. So we'll see what the volume will be. But as I said, we see during activity, being back on the increase with some customers, to name one, Aramco, as an example, in Middle East. So we will see. But again, it's always a question, every quarter we have to forecast how much volume customer will call up from the orders we already have. It's the question of just delivering the order to match their needs.

Okay, thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you again for joining us for today's call. We are very pleased with the track record of executions since the launch of the new value-added plan in May 2022. We see further room to drive higher returns in our business. We will continue to optimize our capital allocation and capital return framework to deliver maximum videos to our shareholders. Thank you again. Operator, you may close the call.